Logistics Performance in Baltic Sea Area

Managing Director Mikko MelasniemiFinnish Association of Purchasing and Logistics LOGY

Topics• Trends in global logistics• Logistics Performance Indicator• State of logistics in Finland• Regional projects between Finland and

Russia• Northern Dimension in Naples• Potential beyond the near future

– Mutual competition over cross cultural supply chain

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

"Excellence in Logistics"

European Logistics Association (ELA), 2004Biggest challenge is the explosion of

supply chain complexity– Larger share of purchases and sales outside Western

Europe • less failure tolerant supply chains

– Ever increasing customer requirements • service levels, lead times, delivery reliability

– Increasing amount of value added services• Shifting activities from manufacturing to distribution centres

– Higher product complexity• Shorter product life cycles, arising number of stock keeping

units (SKU)

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

"Excellence in Logistics"

European Logistics Association (ELA), 2004Leading capabilities to manage complexity

– Collaboration • Sharing and utilizing information along the entire supply chain,

which leads to higher supply chain quality and lower costs

– Value chain management • Holistic view of all the end-to-end issues• Integrating supply chain partners• Outsourcing in a sophisticated way

– Differentiation of supply chains• Meet specific requirements of customers, sales channels, type of

product, regional specifications• The time of “one size fits all” is over!

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

What is the LPI?Logistics Performance Index (World Bank

2007)

Data for the LPI

Logistics professionalsin international

freight forwarding

A set of indicators that measure the performance of the logistics environment of

countries

Ojala & Solakivi CSCMP Sept.22, 2009 5

Global Facilitation Partnership for

Transportation and Trade

Turku School of Economics, Finland International

Federation for Freight

Forwarders Associations

Professor Lauri OjalaTurku School of

Economics, Finlandlauri.ojala@tse.fi

International comparison of the Logistics Performance Index (World

Bank 2007)

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

1. Efficiency and and effectiveness of Customs and other border procedures

2. Quality of Transport and IT infrastructure for logistics

3. Ease and affordability of arranging shipments4. Competence in the local logistics industry (e.g. transport operators, customs brokers)5. Ability to track and trace shipments

6. Domestic logistics costs (e.g. local transportation, terminal handling, storage)7. Timeliness of shipments in reaching destination

Logistics Performance Indicatior Globally

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

The level of Logistics Performancevaries a lot in Europe

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

99

15

4

4247

58

3 4074

16

911

718

22

26 139

115

Source: World Bank, Logistics Performance Index

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

”Logistics gap” among countries in BSR

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

What does low LPI mean in practice?

”…lower costs for logistics reduces the cost of delivered products – and thereby encourages sales, increases trade, opens new markets, breaks down local monopolies, increases competition and generally encourages business.”

(Waters 2003)

prosperity, competitiveness

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Similar trend despite research method:

logistics costs decrease till end-90s,

and rise after that

0 %

2 %

4 %

6 %

8 %

10 %

12 %

14 %

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Finland state of logistics ELA/A.T .Kearney CLM/CSCMP VINNOVA

2008

0 %

2 %

4 %

6 %

8 %

10 %

12 %

14 %

% of sales

% of GDP

Ojala & Solakivi CSCMP Sept.22, 2009 11

Costs indexed; 2008 = 100

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Distribution of turnover for different types of logistics services

– 2006 and 2010

The demand for more individualised products is expected to increase in the future

30%

40%

50%

60%

70%

80%

90%

100%

2006 2010 2006 2010 2006 2010 2006 2010

St. Petersb. Meck.-Vorp. Estonia Hamburg

Pure transportation services

Pure warehousing services

Standardised logistics service packages

Customized logistics service packages

Slide as originally presented by Professor Wolfgang Kersten

MoA of Northern Dimension Partnership

Signed in Naples in October 2009• Memorandum of Understanding setting out the modalities of

establishing the Northern Dimension Partnership on Transport and Logistics

• Mutual understanding by European Commission, Ministries responsible for transport, infrastructure and logistics

– Norway, Russian, Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland, Sweden, Republic of Belarus

• Was agreed about– Goal of partnership to improve major transport connections and logistics in the

Northern Dimension region– Other matters: Action plan, Exchange of information, Cooperation framework,

Cooperation with regional bodies, Participation of private sector and social partners

• Next step in December, when officers from ministries meet– Resources and guidelines over the projects

• Important because– Baltic states have mutual forum for Northern Dimension– Formal way to go ahead with projects– Helps to take logistics into practise

• Goal: to have a momentum in EU budget for Northern Dimension

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Conclusions

• Focus on value in supply chains, not only transportation– Two-way supply chains instead of one way transit traffic– Supply chain from supplier to final customer can bee

complicated but competitive

• Logistics performance is a case of competitiveness– Logistics costs are rising, time is money– Efficiency and visibility

• Northern Dimension needs a line in EU budget– Act regionally, think collaborative

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Thank you for your attention!

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

LOGY Mission and Values

LOGY • offers its members an

innovative forum for continuous development of their competence and

• aims at improving the competitiveness of members business

• aims at improving the valuation of logistics and purchasing.

Competence

Members

Cooperation

Development

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi